The terms “credit score,” “credit rating,” and “FICO score” are often used interchangeably, explains financial expert Ethan Ewing, president of Bills.com in San Mateo, Calif. “This is basically correct. FICO simply refers to Fair Isaac Corporation, the company that originally developed a ‘score’ method of rating consumers’ credit histories.”
Today, the three major reporting agencies (Experian, Equifax, and TransUnion) each report their own credit scores. There’s the Plus Score, calculated by Experian; the Empirica Score, offered through TransUnion; and Equifax’s Beacon Score. And though lenders use different factors to rate your overall credit worthiness, says Ewing, “it basically comes down to whether you pay -- and pay on time -- and whether creditors have reason to believe you might be overextending yourself.” The more responsible you are with credit, the higher your score will be.
Factoring the Formula
While you won’t be quizzed on this later, you can earn some real-life “extra credit” (and lower payments) by studying the factors that drive your credit score. Doug deBruyn, a Seattle-area loan originator and certified mortgage planning specialist with VanDyk Mortgage, teaches a credit-scoring class for realtors and consumers, and shares his smarts to help you pass your next nerve-wracking credit test with flying colors. Sorry, there’s no “cramming” come loan-time.
Click through the next slides to brush up on the five key components that factor into your credit score:
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